The revelations provide more evidence "the banks cannot manage
their risk," says MIT Sloan School professor and former IMF chief
economist Simon Johnson. "We need to get our [banks] out of this
crazy business before they do more profound damage to all of us."

As with many others, Johnson says JP Morgan's big loss prove the
need for more stringent regulation of banks' trading activities.
"Anyone who opposes the Volcker Rule now should be exposed to repeated
and complete public ridicule," he says.

(On Thursday's conference call, JP Morgan CEO Jamie Dimon said the hedging that led to the
loss would not have violated the Volcker Rule, but that has only
emboldened proponents of tougher restrictions on banks. "The
enormous loss JP Morgan announced today is just the latest
evidence that what banks call 'hedges' are often risky bets that
so-called 'too big to fail' banks have no business making," said
Sen. Carl Levin (D-MI).)

More surprisingly, Johnson says the buck stops with Jamie Dimon
and argues the famed CEO should lose his job over this loss,
which many observers believe will ultimately cost the bank far
more than $2 billion.

"At any other company in any other industry under these
circumstances the CEO would resign," Johnson says. "If Boeing or Caterpillar or any other reputable company were
to lose this much money relative to operations in a haphazard
manner on activities that were so contrary to the principles in
which the CEO stood? Yes the person in question would resign. If
he didn't resign, the board would remove him."

Barring that, Johnson said regulators should remove the
responsible executives. "But that's not going to happen in
banking; that's the power and privilege that goes with being 'too
big to fail,'" he says.

Again, Johnson's views do not represent the consensus, which is
that JP Morgan will move on from this, albeit with a hit to
earnings and a blemish on Dimon's once-sterling reputation.

KBW's David Konrad called Thursday's news "a black eye for
management" and Rochdale SecuritiesDick Bove dubbed it a "body blow," even as he
maintained a "buy" rating on the stock.

Bernstein analyst John MacDonald cut his price target on JP
Morgan to $44 from $56, writing: "Although the financial impact
of this looks manageable for JPM, we feel that the size and
sudden nature of the losses call into question multiple aspects
of the company's risk management systems, and to some extent the
business model that gives rise to the need for such large
investments and hedges."

Indeed, many questions remain about
how an alleged hedge -- which is supposed to mitigate risk --
went so wrong, so quickly in a period of relative calm in the
credit markets.

"These are huge losses given where we are on the global credit
cycle," Johnson says. "There's not that much stress on the market
compared with what could come our way. Yet JP Morgan is sitting
on a massive loss and I guess they plan to sit on it."

Referring to the potential for a real "credit event" emanating
from Europe, Johnson ridiculed the Federal Reserve for allowing
banks to reduce their capital base and effectively increase
leverage in recent months. "It's about time people running the
Fed stood up and took proper responsibility here," he says.